Minimum Wage Entitlements

Apr 9, 2018

Calculating Minimum Wage Entitlement fact sheet

The minimum adult wage rate for a worker 16 years or older who is not a starting out worker or trainee is $16.50 per hour from 1 April 2018.The starting-out minimum wage for eligible 16- to 19-year-olds is $13.20 per hour.

The minimum training wage rate is $13.20 per hour.

Calculating minimum wage rates — hourly, daily, weekly, fortnightly
You can assess minimum wage on an hourly, daily or weekly or fortnightly basis:

Rate Adult worker Starting-out workers & Trainees
Hourly $16.50 $13.20
Daily (8 hour day) $132 $105.60
Weekly (40 hour week) $660 $528
Fortnightly (80 hour fortnight) $1,320 $1,056

Calculating wages and making sure that your business is paying your workers at least minimum wage, or above, is relatively straightforward when your employees’ hours of work are regular and fit neatly within the ranges of an 8 hour day, a 40 hour week or an 80 hour fortnight.

Complying with minimum requirements
It is more complicated if your business is seasonal, with peak seasons requiring your workers to work more hours than usual, or if the hours of work are irregular, for whatever reason. Employers must have systems to check that their business is fully compliant with minimum wage requirements. Even when you pay above minimum wage, you need to check.

Every employee must be paid at least the minimum wage, for every hour they work. If, during a busy season, an employee works over and above their normal hours, they must be paid at least minimum wage for every hour they do work.

Example
Jo has an orchard and pays John:
Hourly rate Pay basis Usual weekly wage
$20 per hour 40 hour week $800

Everyone works extra hours during the picking season. When Jo sits down to work out the pays, she sees that, for this week, John worked 55 hours. If she pays him his normal wage, she will be paying him less than minimum wage. (800 ÷ 55 = $14.50).
To make sure she complies with minimum wage requirements, Jo finds out the minimum amount payable for 55 hours work. This is $660 + ($16.50 x 15). $660 + $247.50 = $907.50. So, the difference between the amount John is paid weekly ($800) and the minimum amount he must be paid for the 55-hour week is $107.50.
Check the wages you pay employees comply with minimum requirements and be prepared to top up wages in a pay period to at least the level of the minimum wage.

Non-cash benefits
If you provide accommodation for your employees, you can agree with them to deduct the cost of accommodation from their wages. The agreed value of the accommodation can be counted as ‘wages’ for the purpose of working out compliance with minimum wage.

If you provide other non-cash benefits (like firewood or food), you can also agree with the employee to deduct the cost from their wages. However, the agreed value of these benefits cannot be counted as ‘wages’ when you’re working out compliance with minimum wage requirements.

Make sure you document all agreements with employees.

KiwiSaver employer contributions and the minimum wage
KiwiSaver employer contributions must be paid in addition to the minimum wage. You are able to agree with your employees a ‘total remuneration’ amount (which includes the amount of KiwiSaver employer contributions), however this will not apply where the amount of wages excluding the KiwiSaver employer contribution works out to be less than the minimum wage.

Minimum wage exemptions
Labour Inspectors may issue minimum wage exemption permits to workers who are limited by a disability in carrying out the requirements of their work. This means a lower minimum wage rate is set for a particular person in a particular job for the period in the permit.

The intention of this provision in the Minimum Wage Act is to help some people with disabilities to get work. Labour Inspectors will issue a minimum wage exemption only if they think it is reasonable and appropriate to do so. They can refuse to issue one if they think the employee should be paid the minimum wage, or if the wage offered is unfair.

Our Recommendation
It is important to keep good records of all wages and all agreements with employees about salary arrangements, deductions and non-cash benefits. In addition to the very detailed requirements of the wages and time record, there is also a legal requirement to have records in sufficient detail to show compliance with minimum entitlement provisions such as minimum wage.

If you have queries about minimum wage requirements or if you consider circumstances warrant applying for a minimum wage exemption, please contact us.